Tag Archives: property tax

Myleene Klass may be deeply confused about how the mansion tax will work in practice, but she probably isn’t the only one. As a supporter of land value taxation, it is no surprise that I think it is a flawed policy, but what’s really problematic is the way both Labour and the Lib Dems are attempting to sell it.

In many ways, Klass’s tustle with Ed Miliband sums up the problem. She seems to think that, as a tax which will only apply to properties worth £2m and over, that in parts of London that applies to garages. She’s wrong. The £2m figure was calculated to be as painless to as many people as possible. In fact, under Vince Cable’s original proposals in 2009, the tax was to apply to properties worth £1m and over. This was quickly adjusted following an outcry from Cable’s fellow South West London MPs who feared a backlash (and even £1m is a bit steep for a garage, Myleene).

The UK – and London in particular – has a real problem with rising house prices. Home ownership has reached extremely low levels compared to recent history and the fears of another housing price bubble, despite the views of fantasists like Danny Alexander, are very real. The UK ought to be having a very serious conversation about how it tackles this.

Instead, we try to kid ourselves that this is just a problem for the very rich. Hence the mansion tax’s £2m threshold. We ought to be having a national conversation about restructuring our economy to avoid property bubbles. We ought to be talking about a property tax which kicks in at much lower levels. But we’re too busy blaming everything on immigrants and the poor.

Meanwhile, our existing domestic property tax, the council tax, has not been revalued in England since 1991. If our politicians lack the courage to even do that, what hope is there for us to have a serious conversation about what’s needed.

Ironically, the Lib Dems in particular, are in a better place than they have been in years to make the case. 10 years ago, they were transfixed with the idea of scrapping all property taxes and making taxes on employment take up even more of the strain. Now they are making the case for more taxes on property and taking people out of income tax altogether. Yet there is no narrative connective tissue between the two. They aren’t making the case for a fairer society and stronger economy in which a hard day’s work is taxed less and wealth is taxed more.

Ignore policy for a minute, which is largely irrelevant these days in a world of coalition government. What a liberal party ought to be making the case for right now is a new economy with significantly different priorities. It can’t be done overnight, but it can be done over time, piecemeal. There can be a direction of travel. It can’t however be done by stealth; the public need to buy into it or it will fall apart after the first Daily Mail headline.

The mansion tax could be step one of a new economic plan; as it is, it’s a policy cul de sac. Assuming it eventually happens, it will probably suffer the same indignity as council tax, and never be touched again. Or worse, start going up by inflation to ensure that only a tiny minority ever pay it and its true revenue potential is never realised. It’s emblematic of the political malaise; instead of dealing with the big political issues of the day, we’re reduced to soundbites.

I will blog in more detail later, but initial responses? Firstly, it is regrettable that this is yet another badly handled stunt announcement which has bypassed the policy committee, but it will surprise no-one to hear me say that I believe it to be a step in the right direction. It doesn’t go anything like far enough though. 0.5% on properties above a £1m threshold? So a £2m valued property would be looking at a £5,000 tax. Chickenfeed for the people who have profited from a property bubble for decades.

It won’t raise very much – £1.1bn. Why, when it comes to public services is the emphasis all on “savage” cuts, yet when it comes to wealth taxes we are taking such baby steps? There is a real cognitive dissonance between the two approaches. We should go further and ideally the tax should be on land values rather than property prices (although if we want to introduce something immediately, the latter will be easier and it can be replaced by a land value tax over time). Even Centre Forum, the holders of the Orange Book flame, are calling for a 1% property tax (plus scrapping exemption of capital gains on property), which they would estimate would raise £6-10bn annually (pdf). That sounds like a good compromise to me.

The right, no doubt, will start hopping up and down and denouncing this as a tax on “aspiration.” What are tuition fees though, if not a tax on aspiration? Vince is currently calling for benefits to be scrapped for all middle income earners – families in particular. If that isn’t effectively a tax on aspiration, what is? They need to get serious and stop realise that aspiration is not a luxury that only the rich can afford.

Anyway, I need to digest this. In particular, I need to read what Vince has to say in ALTER‘s new pamphlet The Case for a New People’s Budget.